Fairfax Supervisors Rap Development Board

The Fairfax County Board of Supervisors yesterday criticized the county's economic development authority, claiming the agency had abused its powers to help businesses obtain low-interest financing.

Even Board Chairman John F. Herrity, who opposed some of the actions voted by the board, joined the attack, agreeing the authority's decision to help finance a large furniture warehouse-showroom "was probably a mistake."

The supervisors, some barely suppressing their anger at what vice chairman Martha V. Pennino (D-Centreville) called "subterfuge," told the authority to adopt guidelines that would bar it from helping to finance political operations.She and other board members were reacting to the $7 million industrial development bond that the authority tentatively approved last year to help direct mail wizzard Richard A. Viguerie build a new office building in the county.

Officials of the development authority have contended that they are being attacked unfairly for taking advantage of a federal law that allows localities to approve so-called "tax-free" loans to businesses that might locate elsewhere. Fairfax County, the officials say, needs these new businesses if the rapidly rising cost of local government is to be taken off the homeowners who pay most of the county's property taxes.

Yesterday, however, the authority found itself on the defensive. The supervisors accused the largely independent authority of seemingly sidestepping its own ban on approving loans to retail businesses and making loans to controversial political figures such as Viguerie.

Pennino, a Democrat, noted Viguerie's ties to conservative Republican causes. "If they do it for the Republicans, we would have to do it for the Nazis and the Ku Klux Klan," she said in an interview after offering the motion restricting the authority.

The motion passed by a vote of 5 to 3. If acted on by the authority, it could jeopardize Viguerie's low-interest financing. While Viguerie has received a tentative approval from the authority, he must come back to it for final approval after he has obtained his financing commitment. Pennino said she assumed that the authority would veto the Viguerie application on the basis of yesterday's vote.

The supervisors also approved, on another 5-to-3 vote, a motion directing the authority to make sure it undertakes an "informed, responsible financial analysis" of its applications. Applications have surged in recent months as businesses have scrambled to beat high interest rates on conventional loans.

The authority's approval can add up to significant savings for approved companies, because the interest income that financial institutions earn on the loans is free from both state and federal income taxes. Therefore the rates on such loans are usually well below the prevailing market rates.

Some of the supervisors chastised both authority officials and the county's own staff for failing to provide a thorough review of the financing agreements for a $5.8 million Marlo Furniture Co. warehouse-showroom that the supervisors ordered last December.

Under questioning, Deputy County Executive James P. McDonald, who led the county review, said: "No, we did not look at Economic Development Authority files . . . [our] staff did not look at any EDA documents."

The county's own bond counsel, Walter W. Craigie Sr. of Richmond, told the board that even though the county has no moral or legal responsibility for industrial revenue bonds issued by the authority "a default would tarnish the county's image in the financial markets and could have an indirect effect with the rating agencies."

Craigie said he opposes industrial revenue bonds. "The market is simply being flooded with these bonds. This is increasing the interest rate at which all bonds are being sold."

The authority's vice chairman, James W. Todd, said after the session that the agency would follow up on the criticisms. "We'll review everything," he said after the board meeting.

During the session the authority revealed that it has issued 31 bonds worth $49.6 million and has pending another 53 transactions worth $102 million. w

The Marlo operation was one of the largest bond deals approved by the Fairfax authority.Supervisor Thomas Davis III (R-Mason), in whose district the complex is located, said at yesterday's session that he visited the store last weekend. "I was jumped by five salesmen," Davis told his colleagues. "It seems to me it was primarily a retail operation."

In addition to Pennino, the supervisors voting in favor of the changes were Marie D. Travesky (R-Springfield), Audrey Moore (D-Annandale), James M. Scott (D-Providence) and Duckworth.